Aramco to post lower profit and may slash dividend

• 7% decline in profit predicted
• No change expected in capex
• Saudi oil output at 10-year low

National oil company Saudi Aramco is forecast to post lower first-quarter profit and may cut its 2025 dividend further as oil prices dip below its self-funding breakeven point, analysts have said.

The world’s biggest oil company by production is likely to maintain its guidance for capital expenditure, however.

Aramco is expected to post at least a 7 percent decline in year-on-year net profit in the three months to March 31 to about $25 billion due to lower oil prices and unchanged output compared with the year-earlier period, two analysts said. 

“We expect volumes to be flat, with oil output maintained at the same level due to extension of cuts by Opec+,” Jassim Al-Jabran, head of sell-side research at Riyadh-based Al Jazira Capital, told AGBI.

Aramco announces its first-quarter results on Sunday.

The average Brent crude oil price in the first quarter was $75 per barrel, about 8 percent lower from a year ago. An oil price in the low $70s per barrel is below the company’s “self-funding breakeven”, according to HSBC estimates. 

So far in 2025, Brent is down 15 percent to a four-year low of around $60 per barrel. It plunged after President Donald Trump announced on April 2 a near-tripling in effective taxes on imports to the world’s largest economy, and as Opec+ decided to quickly unwind nearly half of 2.2 million barrels per day in voluntary cuts in three months.

These oil producers are pumping more despite Opec, the International Energy Agency and the US Energy Information Administration revising down their oil demand growth forecasts for 2025 and beyond, on lower expected global economic growth because of the trade tensions.

Aramco’s refining and petrochemical units are also suffering from lower profit margins, especially as China boosts domestic production towards self-sufficiency, chief financial officer Ziad Al-Murshed said in March during a fourth-quarter earnings call. 

Saudi Basic Industries Corp, the petrochemicals company 70 percent owned by Aramco, said it swung to a SAR1.2 billion ($320 million) first-quarter loss “due to higher feedstock prices” and a SAR1.07 billion cost “related to a strategic restructuring initiative”. 

Saudi oil production, which includes output from Aramco and a neutral zone shared with Kuwait, is now at a 10-year low, but its gas output will increase this year as the Jafurah unconventional field comes online, likely in the second half of this year.

“This project is less likely to be impacted by the global factors with it being targeted at domestic production,” said Al-Jabran. “Delaying some of the ongoing projects may also increase the costs, so we don’t see any red flags with Aramco continuing with its capex plan.” 

Aramco is likely to maintain its $52 to $58 billion capital expenditure guidance for 2025, compared with $53 billion last year, despite the oil price rout, analysts said. 

“Even during the pandemic when oil prices went to negative, the company continued its long-term investment plans,” Amena Bakr, head of Middle East energy and Opec+ Insights at data provider Kpler, told AGBI. 

“Unlike international oil companies, Aramco has the flexibility and better tools, scale at its disposal to overcome periods of lower oil prices.” 

But the biggest question revolves around Aramco’s ability to stick to its $85 billion dividend forecast, which is already about a third lower than last year. 

Saudi Arabia to ‘roll with the punches’ on oil price

Saudi budget deficit jumps fourfold as oil slumps

Oil price fall poses spending dilemma for Saudi Arabia

“We always also have flexible capital in our programme when we give guidance, and that flexible capital we can tap into it, if needed, to satisfy our obligations in terms of dividends,” CEO Amin Nasser said on the March earnings call.

HSBC’s stock valuation for Aramco faces several downside factors, including geopolitical risks, uncertainty over its downstream investments and lower oil prices that “would affect medium-term distributions”, it said in a March report. 

Aramco may have to tap the debt market to cover some costs and finance its dividend if it affirms the $85 billion payment and capital expenditure guidance, the analysts said. 

“A further reduction of dividends is possible, but it depends on how the oil price reacts as the current environment is highly volatile,” said Bakr.